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US Drilling & Completion Market Forecast Q3 2018


Examining six of the key US unconventional basins and drawing from extensive data and expertise from Westwood’s latest acquisition, Energent Group, the US Drilling & Completion Market Forecast is an invaluable guide to the future prospects for one of the hottest areas of global activity at present.

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Despite Permian growing pains, D&C outlook remains strong 

Westwood Global Energy Group (Westwood) released its latest basin-by-basin outlook for the US onshore market, harnessing the data from US unconventionals specialist Energent Group’s multi-million well database. Despite Permian Basin take-away capacity constraints, the US market looks set to experience multiple years of growth in both wells drilled and wells completed.

Permian Basin Deferred Completions Through 2019
Source: Westwood

Permian will see 345 deferred completions by the end of 2019 due to pipeline takeaway capacity constraints. All the supply chain, logistics, and capital that were allocated towards 345 expected completions now have to find either new buyers or storage for a considerable period of time, reducing equipment utilization and increasing supply. Westwood expects 2.5 million tons of sand and 5 billion gallons of water will be directly impacted by the deferred completions, while demand for 1.6 million horsepower for pressure pumping will evaporate in the second half of 2018. Additionally, $1.4 billion of CAPEX for completion operations will be delayed or reallocated on other basins such as Eagle Ford, DJ-Niobrara, and MidCon.

Over the forecast, Westwood expects a continuation of the recovery with several plays benefiting from the Permian bottleneck. Arguably more important will be the relaxation of supply chain constraints, as service companies add equipment, tools, frac sand, and frac horsepower supply and capacity in 2018.

Key Conclusions for US Unconventionals:

  • Permian. Westwood projects supply-chain and takeaway capacity concerns to result in over 345 Permian completions deferred between 2H18 and Q4 2019, with much of the planned CAPEX reassigned to other basins. Planned commissioning of new pipelines will alleviate bottlenecks and drive completions in Q1 2020, outpacing the drilling activities in the region.
  • DJ-Niobrara. Oil production is being stifled by natural gas processing constraints, resulting in CAPEX being delayed to 2H18 until new infrastructure comes online. The potential risk stems from a changing regulatory environment, as industry supporter Gov. Hickenlooper (D) will step down in 2018 after two terms in office.
  • Eagle Ford. Operators in the basin are reporting higher price realizations on NGLs and oil. Given increasing amounts of exports from Corpus, the shale play is expected to have a strong tailwind in the near future, lasting into late 2019. After 2019, drilling activities will slow down as available prime acreage positions, i.e. high oil-in-place zones, are becoming scarce.
  • Haynesville. Haynesville’s shale gas production is surging with extensive midstream infrastructure in place and proximity to U.S. Gulf Coast markets. Pure-play Haynesville operators will benefit from supply chain improvements, proximity to Gulf Coast, and refrac success in the shale play.
  • MidCon. MidCon is experiencing a heightened effort to maximize returns in the next 18-24 months in the midst of Permian bottleneck issues. Costs reductions are achieved via supply chain optimization, local frac sand, and longer laterals with high-intensity completion techniques.
  • Williston. Bakken shale operators are benefitting from enhanced completions, low breakevens, and favorable oil prices, but gas capture requirements, rough winter weather, and service cost inflation could hinder completion growth in the medium term (until 2019).
  • Appalachia. Following the conclusion of takeaway constraints hindering production within the Appalachia basin, operators are now facing backwardation due to excessive hedging strategies, likely impacting future production schedules.

The seven regions covered in this report (DJ-Niobrara, Eagle Ford, Haynesville, MidCon, Permian, Appalachia, and Williston) have seen a significant uplift in activity following oil prices rallying in early 2018. A continuation of recovery through 2018 has led to rising prices across the supply chain. Based on an expectation of rising consensus commodity prices through to 2022, Westwood expects the US market to enter a period of sustained growth in both activity and expenditure.

Examining seven of the key US unconventional basins and drawing from extensive data and expertise from Westwood’s, Energent Group, the US Drilling & Completion Market Forecast is an invaluable guide to the future prospects for one of the hottest areas of global activity at present. Covering expectations both over the near-term on a quarterly basis (out to Q4 2020) and the long-term on an annual basis (out to 2022), the report builds on a well-by-well historic platform to analyse the latest drilling & completion trends in key drivers such as measured depth, lateral lengths, stage counts and drilling days on a granular level.